According to the European Union Intellectual Property Office, the counterfeiting trade costs European manufacturers €26 billion a year, including €3.5 billion for French luxury goods manufacturers. Like all criminal activities, counterfeiting can be a way of financing terrorism. Subject to fewer crackdowns than other forms of trafficking, it provides an immediate source of cash that is untraceable.
Counterfeiting is a crime that pays. “Terrorists, gangsters and the like soon realised that counterfeiting was a useful way of financing their other crimes,” explains Delphine Sarfati-Sobreira, Director General of Unifab, the union that promotes and defends manufacturers’ intellectual property rights.
The French National Institute of Industrial Property (INPI) addressed the theme of “Counterfeiting and Terrorism” in its 2016 report. French parliamentarian Bernard Brochand raised a question on the subject in July 2016, which remains unanswered:
Written question no. 98100 from Mr Bernard Brochand, published in France’s Official Journal on 26 July 2016
“Mr Bernard Brochand draws the attention of the Minister of Finance and Public Accounts to counterfeiting as a new source of funding for terrorism. Unifab recently submitted a report which clearly states that the sale of counterfeit goods funds terrorist organisations. Counterfeiting has become a threat for two main reasons: it is difficult to track down in a global economy and it is the most lucrative and least severely sanctioned criminal activity. Indeed, counterfeiting is currently the second largest source of criminal revenue in the world and terrorist networks now oversee the manufacture and distribution of counterfeit goods to finance their operations. During the investigation into the January 2015 attacks in Paris, it was proven that the Kouachi brothers had been involved in the trafficking of sports shoes to fund their attacks. Similarly, the Molenbeek district, the focus of investigations into the attacks of 13 November 2015, is the scene of frequent seizures of counterfeit goods and has served as a major hub for this kind of trafficking for several years now. Today, the profile of terrorists has changed and any delinquent can fall rapidly into terrorism. For these sometimes isolated terrorists, counterfeit trafficking can be a quick way of generating funds while remaining firmly under the radar, making it an easy choice for them.
Firstly, counterfeiting is so appealing because it is one of the most lucrative criminal activities for terrorist organisations. Narcotics trafficking yields a 200% profit but counterfeiting pharmaceuticals generates a net return of 2,000%. Why get involved in risky drug trafficking when you can make ten times as much from counterfeit goods? Secondly, the penalties for counterfeiting are particularly lenient. The activity yields high profits for low investment, and the penalties issued are seldom enforced because they are so soft. What is more, counterfeiting is encouraged by the Internet and the permissive legislation. For all these reasons, he asks what measures the Government intends to take to combat counterfeiting effectively, particularly regarding its connections with terrorism.”
The Robert Schuman Foundation has also opened a debate on the issue. On 11 April 2018, it held a conference at Egmont Palace in Brussels on the theme of “Smuggling, counterfeiting and the financing of terrorism – mobilising economic stakeholders”. The event brought together leading personalities and representatives from public organisations involved in the work to counter laundering (Tracfin, CTIF, Europol, the European Counter-Terrorism Coordinator and an array of stakeholders from industry.)
When buying a fake crocodile shirt in a Moroccan or Turkish market, a fake designer bag on a beach in southern Spain or branded sports shoes at an unbeatable price “off the back of a lorry”, you may unknowingly be funding a terrorist network and, in all events, encouraging criminal organisations to produce these counterfeit goods. “It takes two to tango”: without buyers, there are no sellers. Buyers of counterfeit goods are accomplices, subject to a three-year prison sentence and a fine of €300,000 under French law (Articles L335-2-1 and L335-4 of the Intellectual Property Code).
Terrorists are increasingly turning to this as a source of funds: the Kouachi brothers, the Charlie Hebdo terrorists, made a living from drug trafficking and from dealing in counterfeit Nike sports shoes.
As terrorists’ operating methods evolve and low-cost forms of terrorism emerge, tougher measures are required to combat such trafficking. The issue has been addressed by the French Senate’s Finance Committee, which published a prominent report, the conclusions of which resulted in a bill adopted by both chambers and culminated in the Law of 11 March 2014 aimed at strengthening the fight against counterfeiting.
The preparatory work clearly mentions the link between counterfeiting and the financing of organised crime and terrorism. Considering the cost of counterfeiting to the economy and the overall criminal repercussions, a bill was submitted to the French Parliament as a direct result of the report by MPs Christophe Blanchet and Pierre-Yves Bournazel, in which they sought to address these issues.
It has been proven that ETA, the Basque separatist organisation, controls the trafficking of fake clothing and bags in southern Spain Meanwhile, the Revolutionary Armed Forces of Colombia (FARC) specialise in fake CDs and cigarette trafficking, and the IRA also dealt in contraband cigarettes and counterfeit pharmaceuticals.
In an interview published in Le Monde, Pierre de Bousquet de Florian, former director of the DST (French Directorate of Territorial Surveillance, now the DGSI, the General Directorate for Internal Security), said that Afghan terrorist networks existed “thanks to crime, robberies, credit card copying, […] and the counterfeiting of designer clothes”.
Interpol also estimates that al-Qaeda and affiliated groups received between $300 million and $500 million from their “supporters” over the past decade. This includes funds from both legal and illegal activities, and especially the trade of counterfeit goods.
Documents from al-Qaeda propaganda recommend trading in counterfeit goods to generate more funds to finance terrorist operations. In November 2003, the dismantling of a counterfeit trafficking network led to the arrest of 13 members of the Takfirist branch. They were suspected of having supplied weapons and false papers to Algerian terrorists via a network financed by the sale of counterfeit garments.
Following the Madrid bombings on 11 March 2004, orchestrated by the Al Qaeda terrorist network, former Spanish Interior Minister Ángel Acebes pointed out that “one of the suspects arrested was a well-known counterfeiter”.
In April 2006, an AFP report indicated that a dozen people had been arrested simultaneously in the south of France and Italy as part of an investigation into funding terrorist activities. The investigation revealed that the suspects, close to the Salafist Group for Preaching and Combat (GSPC), got their resources from various criminal activities, including counterfeiting.
In 2007, US federal authorities dismantled an international counterfeit clothing ring based in New York. At least three of those arrested had links to the Islamist terrorist organisation Jamaat ul-Fuqra operating in the US.
In 2008, a Pakistani named Saifullah Anjum Ranjha, a resident of the United States involved in a network of drug trafficking, smuggling, cigarette counterfeiting and arms trafficking, was convicted of money laundering and terrorist financing.
From October 2003 to September 2007, a share of the profits from these transactions ($2.2 million) was transferred to al-Qaeda members or supporters through a money transfer company called Hamza Inc.
Recently, the leader of a terrorist group affiliated with al-Qaeda in the Islamic Maghreb (Aqmi), Mokhtar Belmokhtar, involved in cross-border trafficking, was so successful in the counterfeit cigarette trade that he was nicknamed “Mr Marlboro” by the authorities. His involvement in terrorism has been reported on multiple occasions. Mokhtar Belmokhtar’s group claimed responsibility for the terrorist attacks in Bamako on 7 March 2015 and those in Ouagadougou on 15 January 2016.
The connection between terrorist networks and organised crime depends on the local context, the political environment, the availability of certain resources, the sanctions applied in the country in which these groups operate, along with other factors.
– For example, in Africa, al-Qaeda has exploited weak national policies and used corruption to its advantage to engage in criminal activities such as drug trafficking, kidnapping for ransom and selling counterfeit goods. Criminals have used the Covid-19 pandemic to further develop their illegal activities, “from the creation of websites and social media accounts claiming to sell PPE and medical supplies, to the manufacture and distribution of fake vaccines […]” (President of Interpol, 14th International Law Enforcement Conference on Intellectual Property Crime, October 2021).
The Irish National Liberation Army (INLA) generated tens of thousands of pounds each month from the sale of fake clothing at Christmas markets in 2019. Prior to that in July and February of the same year, the INLA had firearms and around 30,000 illicit cigarettes seized (Belfast Telegraph).
Then there is the rise of mafia terrorism with, for example, a criminal organisation linked to the Camorra, discovered by the French and Italian police in a case where a significant share of the revenues came from the trafficking of sophisticated counterfeit products across Europe (most notably, counterfeit branded digital cameras) (Le Monde);
The risks have increased with the use of cryptocurrencies, as Louise Shelley, Virginia University Professor and Director of the Terrorism, Transnational Crime and Corruption Center, explains: “Terrorist groups are technically adept and have relied recently more heavily on technology and cryptocurrencies to facilitate the operations of their illicit trade in arms, drugs and counterfeits, increase anonymity, and reduce risk.” Furthermore, in a recent study, the Rand group has demonstrated that cryptocurrencies facilitate the funding of terrorist groups’ operations and their illegal trade in goods.
Unifab works to raise awareness among French and European institutions with the aim of having crimes related to intellectual property, the counterfeiting of goods and currencies, criminal finance and money laundering included in the Empact priorities (European Union priorities for the fight against serious and organised crime for 2022-2025). A major consumer awareness campaign has been launched to highlight the effects and consequences of trafficking in fake goods, often linked to organised crime, via billboards and ads in local and online media. This vast information campaign covers various sectors of activity, depending on the region. This year, a pilot operation has been launched in Lyon because of the significant number of counterfeit cigarettes found in the city. It is also worth noting the huge increase in counterfeit cigarette consumption in 2020, soaring by 609% across France, a key arena for criminal organisations. Counterfeit cigarettes account for tax revenue losses of €2.5 billion and provide illegal income of €1.5 billion a year – income often used to finance other illegal activities.
This excerpt is taken from ‘Counterfeiting: An ABC of Terrorist Financing’ by Sénatrice Nathalie Goulet – Senate of France, Representing the Orne Department (Normandy), originally published in the Global Terrorism Index 2023 report.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Vision of Humanity.